Welch Allyn shifting work abroad, blames pending medical-device tax

SKANEATELES FALLS, N.Y. (Sept. 17, 8:45 a.m. ET) — Global medical-device and diagnostic equipment manufacturer Welch Allyn Inc. said it plans to reduce its 2,750-person workforce by 10 percent over the next three years, partly triggered by the 2.3 percent excise tax on U.S. medical devices scheduled to go into effect Jan. 1.

The nearly 100-year-old family-owned company said it will close its manufacturing plant in Beaverton, Ore., and consolidate its North American manufacturing at its plant in Tijuana, Mexico, which opened seven years ago, and at its corporate headquarters plant in Skaneateles Falls, N.Y.

The Beaverton location will become one of three new product development and technology centers, with the others being in Skaneateles Falls and in Singapore.

Welch Allyn also said it will open a global finance shared service center for the company in Tijuana.

As part of the restructuring, 160 manufacturing employees in Beaverton and 45 employees in Skaneateles — where the company employs roughly 1,300 — will lose their jobs. The other 75 layoffs are expected to be voluntary buyouts of employees in Skaneateles Falls.

Those changes will reduce the Beaverton workforce to approximately 110.

“These actions will proactively prepare the company to address the onerous U.S. medical-device tax scheduled to begin in 2013 as mandated in the Affordable Care Act, as well as significant changes driven by health-care reform and market dynamics,” said the company in a news release announcing the restructuring and the workforce reduction.

Welch Allyn also said it would re-examine its operations in Europe and restructure its operations in Latin America to make them more competitive.

“We firmly believe this restructuring program is the right thing to do for the long-term success of the business,” said CEO and President Steve Meyer. “This restructuring plan will help us maintain competitive levels of investment in new products and technologies that are necessary to meet the changing needs of the global health care environment.”

Each laid-off employee will receive outplacement service, up to $4,000 in tuition reimbursement, and what the company termed “a generous severance package” — although it did not elaborate.

“We fully recognize the hardship it will cause some of our colleagues in the short term,” Meyer said.

Welch Allyn's global headquarters will continue its evolution into a high technology center and capitalize on demand for digitally enabled patient vital signs monitoring systems and diagnostic cardiology product offerings.

The Skaneateles Fall location also will absorb the patient monitoring, systems and low acuity vital signs product manufacturing operations from its Beaverton facility, the company said.

The Tijuana operations will absorb additional thermometer-probe cover, lamp and some blood-pressure cuff manufacturing operations currently done in Skaneateles Falls.